Free-market conservatives warn of threats to competition, corporate independence
The Trump administration has staked a claim to yet more federal ownership interests in private companies, the Commerce Department announced last week, adding four companies to the federal government’s equity portfolio.
That pushes the number of announced or completed deals to 40, according to the Cato Institute’s Government Ownership Dashboard. The aggressive efforts to become a market participant rather than a market regulator represents a major departure from the federal government’s usual role and also marks one of the most far-reaching departures from traditional Republican economic policy.
On October 22, the Department of Commerce announced letters of intent to award up to $389 million under the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act to four companies developing semiconductor technologies and materials for energy infrastructure and data centers. Under the deals, Helion would receive up to $175 million; Commonwealth Fusion Systems, up to $85 million; Vertical Semiconductor, up to $73 million; and Sibelco, up to $56 million. In return, the department will receive a minority, non-controlling, and non-voting equity stake in each company.
Free-market conservatives and property-rights advocates have noticed. And while criticism of the administration’s growing private-sector portfolio has come from both sides of the aisle, the heat from the right has been burning hotter and hotter.
Still, the administration has defended the acquisitions as a way to strengthen national security and secure domestic supply chains. Commerce secretary Howard Lutnick said the latest awards would boost the economy and protect national security: “The Trump administration is accelerating American semiconductor innovation to enhance our domestic energy and power resources. These investments expand domestic research, secure critical supply chains, and create high-paying American jobs.”
Reassurances not reassuring
Those reassurances failed to tamp down criticism on the right. Writing in National Review, Thomas Rhodes Fellow John Puri observed that the number of semiconductor companies alone that the federal government partly owns has reached 15. What began as an occasional arrangement has become a continuing policy, Puri asserted.
“Under the Trump administration, taking stakes used to be an ad hoc thing,” Puri wrote. “Now, it’s official policy. Federal agencies give out grants and loans, and sometimes just favors, in exchange for companies’ shares. None of the money was appropriated with the intent of receiving equity, so there is no legal basis for any of these positions. That makes the whole mess harder to unwind.”
Over at the Cato Institute, economist Scott Lincicome said Trump’s approach wasn’t capitalism or socialism but a hybrid.
“Some call the government’s new approach ‘state capitalism,’ but it’s clearly not capitalism in any legitimate sense of the word,” Lincicome wrote on October 13. “It’s not quite socialism, either. It’s the ‘middle way between ‘atomistic’ competition and central direction’ that F. A. Hayek warned about …”
Lincicome said the administration’s acquisitions differ significantly from government market intrusions in the past.
“In the rare instances when the US government took full or partial ownership of a private firm, the arrangement occurred during an economic or foreign policy emergency—for example, a financial crisis or wartime—and was temporary, with the government’s exit planned in advance and conditioned on the achievement of certain objectives (e.g., the company returning to solvency),” he wrote.
By contrast, Lincicome wrote, state corporatism has no such characteristics.
“It is not the wartime nationalization of a steel mill to make tanks or the emergency rescue of failing banks and automotive giants during a financial collapse,” he wrote. “It’s not even the statutory creation of a quasi-private, ‘government-sponsored’ entity. State corporatism is the repeated, open-ended, and non-crisis intervention in already-operating private firms—something that will be extremely difficult to unwind and that sets a new precedent for similar future actions.”
Some Republican lawmakers have criticized the initiative. Sen. Ted Cruz (R-Texas) criticized the administration’s Intel investment in September 2025, saying bluntly: “I don’t think the federal government should be taking equity stakes in private companies.” Sen. Jerry Moran (R-Kansas) made an equally succinct point: “Generally I think the private sector should remain the private sector.”
Three fundamental problems
Keeping government out of the private economy as much as possible is essential to liberty and property rights, of course, but the administration’s current equity campaign poses more immediate economic and ethical risks, as critics such as Puri, Lincicome, and Cato’s Ted DeHaven have repeatedly emphasized this past year.
The first concern is that government ownership shifts capital away from companies selected in a competitive market and toward businesses who are well connected in political markets.
“This is textbook capital misallocation …,” Lincicome wrote. “The share prices of the private US firms in which the government has invested have zoomed higher than broader indices after the deals were announced. In each case, the targeted companies will suck up scarce resources for months or years—resources that could have gone to other, more productive alternatives.”
Unrelated investments become distorted, too, Lincicome wrote.
“Bloomberg News reported in November 2025, for example, that speculators have started ‘trying to think like Trump to find the next targets of the US government’s ownership stakes in public companies, which tend to see massive gains following the investment,’” he wrote. “Some institutional investors now evaluate companies based in part on their ‘political relationship with the state.’”
In National Review, Puri voiced a related concern about the government sacrificing standards to get a good deal when it comes to selecting companies, especially in the domestic production of critical materials.
“Treating federal agencies like venture capital firms risks that government will do poorly what it needs to do well,” he wrote. “There is a strong national security case for using public funds to expand production of critical inputs, such as rare earth metals, for which we are dependent on China. It is essential to this mission, however, that finite resources are distributed to companies based on their viability and strategic necessity. With equity stakes on the table, government officials may instead be tempted to reward whoever presents the most attractive deal.”
In addition, Puri wrote, federal ownership may produce financial gains for taxpayers without necessarily improving the broader economy.
“Government-owned companies may well see their valuations jump as investors seek the security of state backing, but that only means they are eating up resources that could have gone to more productive ventures,” he wrote. “It’s the same model that has faltered in China—government directing capital to state-owned and politically favored enterprises—with misallocation costing the country trillions of dollars in missed economic output.”
Both regulator and shareholder
The second problem concerns the federal government’s potentially conflicting roles as regulator, policymaker, financier, and corporate owner. Lincicome argues that the administration’s equity transactions differ from earlier industrial subsidies because they can involve substantial government pressure.
“In almost all past cases of US industrial policy, a company’s involvement with the government was voluntary—if a company’s management and shareholders failed to see a financial benefit in participating in a certain program, it could refuse (or exit),” he wrote. “Trump’s state corporatism, on the other hand, has routinely been accompanied, at the very least, by the appearance of state coercion: Equity stakes have reportedly followed government officials’ threats to reject a foreign acquisition, to withhold already-awarded subsidies or federal contracts, to deny needed permits, to agitate public opposition to management, or to ban the export of certain products unless the state gets its cut.”
U.S. Steel, Intel, Lithium Americas, and Trilogy Metals—all these and more offer specific examples of that coercion. Nippon Steel’s acquisition of U.S. Steel demonstrates, in particular, how federal involvement can extend beyond financial ownership by securing a special ownership interest, commonly described as a golden share, that provides veto authority over specified corporate decisions, Lincicome wrote.
In fact, Lincicome wrote, the Trump administration has already exerted its new control over the company.
“When U.S. Steel announced in September 2025 that it would halt operations at its decaying plant in Granite City, Illinois, which Trump visited and claimed credit for revitalizing with tariffs during his first term, Commerce secretary Howard Lutnick called U.S. Steel’s chief executive to say that the president wouldn’t allow the plant to stop rolling steel slabs,” Lincicome wrote. “Now, the site’s century-old, coal-fired blast furnaces—so dirty and inefficient that they were slated for demolition mere months ago—are back up and running.”
A third problem is accountability, that is, transparency about how federal officials evaluate investment performance and whether acquiring equity changes the obligations that companies originally accepted in exchange for public money.
In an August 2026 report on semiconductors, the Government Accountability Office found that Commerce amended Intel’s federal funding agreement in August 2025 to provide the government with a 9.9 percent ownership stake, initially valued at $8.9 billion. In exchange, Commerce removed Intel’s outstanding reporting requirements.
“As part of the amendments and in exchange for the equity stake …, existing required project milestones not yet achieved were removed,” the GAO report stated. “Language was added stating that each of Intel’s projects would be considered complete once Intel incurred eligible costs in the full amount of the award. In other words, Intel’s projects would be considered complete once Intel spent $7.865 billion on eligible costs, which is equal to the total amount of Intel’s awards for all projects.”
What’s more, the GAO reported, Commerce considered all Intel projects complete at the time the award was amended because Intel had already incurred eligible costs. As such, Commerce no longer required Intel to report progress on the original project milestones.
None of which means that Intel abandoned the projects or that the government lost money, but it does establish that the government sacrificed accountability standards in its negotiations for equity. Lincicome points to other problems with equity stakes, such as the government dictating firms’ routine business decisions, as Trump did with U.S. Steel.
“Here’s the clear threat that state corporatism will cause entrepreneurial dynamism to be slowly replaced by government favoritism and rent-seeking, from both a target firm and those seeking to curry favor with its government owner,” he wrote.
Then, too, Lincicome continued, state corporatism risks breeding even more cronyism and corruption, or at least the public perception thereof. He cited the Pentagon’s push to acquire equity stakes in private companies, which he reported was led by former executives of Capital Cerebrus Management, an investor in many of the same industries the Pentagon was targeting.
“New state investment in Vulcan Elements has connections to President Trump’s son, and White House deputy chief of staff Stephen Miller made a mint after unloading his shares of MP Materials, which had spiked following the firm’s government tie-up,” he wrote.
And what happens when the government wants to get out, or a new president takes office?
“Equity stakes raise a catch-22 for the government,” Lincicome wrote. “Realizing gains from state investments requires Washington to sell its shares, but such divestment might collapse the share prices and finances of the firms at issue—and thus undermine the original stated goal of government support. Politics also might prevent the government from admitting failure and cutting bait when target firms fail to meet the economic or geopolitical objectives the government has promised, a longstanding problem with US industrial policy generally.”
And, not least, the Trump administration’s actions could lay the groundwork for the next US president—Republican or Democrat—to go even further, investing even more taxpayer dollars and stacking the deck in favor of preferred companies and industries.
“As the Trump administration’s corporate body count has mounted, so have pitches from the other team for a formal federal equity apparatus,” Cato’s Ted DeHaven wrote. “In January, Daleep Singh, Biden’s former deputy national security advisor for international economics, said,‘I think we have to institutionalize industrial policy. It’s here to stay,’ and called for a strategic investment fund accountable to Congress. In July, Jake Sullivan, Biden’s national security adviser, argued for a federally chartered Strategic Investment Fund to invest alongside private capital in industries he considers strategically important.”
Former Federal Trade Commission official Doug Farrar pointed to the AI industry and the government’s growing stakes in it, DeHaven reported: “That could be an important point of leverage for a future president of either party—but especially a Democrat who wants to seriously regulate this industry.”
That last question brings the debate around full circle, and that is whether this is a temporary departure from what’s left of market capitalism, or a permanent feature in which the federal government becomes a controlling participant in the economy, and in which both parties ink deals to support and expand it.
The administration argues that taxpayers deserve a share of the financial benefits when Washington invests in private businesses, but the price of those potential returns may be a permanent transformation of the government’s relationship with an economy formerly known as the private sector.
